As BetMGM guides toward profitability in the second half of 2023, U.K.-based conglomerate Entain is mulling its next steps with its massive, long-term investment into one of the three leading sportsbooks in the U.S.
BetMGM, a 50/50 joint venture between MGM Resorts and Entain plc, is coming off a successful year in which it posted net revenue of $1.4 billion while cementing its status as a top-three online sports betting and iGaming operator. By this time next year, when Las Vegas hosts the Super Bowl for the first ever, BetMGM expects to soar to new heights.
Over a six-month period through Dec. 31, 2023, BetMGM anticipates turning a profit for the first time in the five-year history of the venture. Since its inception in 2018, the two gaming powers have invested approximately $1.25 billion in BetMGM, enabling the operator to strike partnerships with the top leagues in North America and compete with industry behemoths FanDuel and DraftKings. But if BetMGM is profitable over the latter half of this year, Entain will discontinue financial support of the online gaming operator, CEO Jette Nygaard-Andersen said Wednesday during a company earnings call.
Representatives from Entain declined comment when reached by on Thursday.
Already live in 25 jurisdictions with access to approximately 45% of the adult population in the U.S., BetMGM entered two new markets last month in Ohio and Massachusetts. Still, the relationship between MGM Resorts and Entain appears to be at a crossroads with the future of BetMGM hanging in the balance. The two companies are faced with difficult decisions in the coming months that may produce some tense moments in boardrooms on both sides of the Atlantic.
Sifting through the weeds
Entain’s comments came less than a week after BetMGM provided full-year 2023 revenue guidance of $1.8 billion to $2 billion, bracketing Bank of America’s estimates of $1.92 billion. BetMGM ended 2022 with a fourth-quarter online sports net revenue margin that doubled from the final three months of 2021. Matt Britzman, an equity analyst from Hargreaves Lansdown, a U.K.-based financial services company, described BetMGM on Wednesday as “a shining star” after the venture topped recent performance expectations.
“The real question here is how long this will remain a joint venture, it seems unlikely both parties will want to continue their U.S. gambling exposure in its current form indefinitely,” Britzman wrote in a research note. “If we had to put money on it, a bid from MGM to take full control looks the most likely outcome – time will tell.”
While there is temptation to speculate on a merger, one expert on finance issues in the gaming industry cautioned against reading “too much into” Entain’s announcement. The announcement does not mean that Entain is exiting the joint venture, per se. Simply put, once the venture becomes profitable, it will be able to “live its on own,” he notes, without requiring “investments from the mothership.”
When asked to explain Entain’s strategy, a source close to BetMGM remarked that since the venture expects to generate positive cash flow internally, the funding requirement from shareholders will cease.
The @BetMGM Lion is a leader in the pride!??#TheKingofSportsbooks has entered 2023 with a world class performance for FY22. Last year, the team brought the thrill, excitement and #entertainment to more fans than ever before. https://t.co/G5MVaAelNM#ItsYourGame
— Entain (@EntainGroup) January 26, 2023